Sale of Personal Residence (Cabin) to Son

[zeros]

Client is selling his personal residence which is a cabin to his son. He discounted it by $40K. Would this in any way be a taxable event of any kind? Just wondering. The profit would be about $70K as he has held it for many years.

[ATSMAN]

Client is selling his personal residence which is a cabin to his son. He discounted it by $40K. Would this in any way be a taxable event of any kind? Just wondering. The profit would be about $70K as he has held it for many years.

Is this the father's primary residence or a vacation home?

[Lion]

Gift tax return.

[ATSMAN]

Gift tax return.

Typically a parent gifts the equity to the child to help them out. I wonder how many people fill out a gift tax return?

[TAXNJ]

Many

Typically a parent gifts the equity to the child to help them out. I wonder how many people fill out a gift tax return?

NOTE: after re-reading the original post - it is a "sale" not "gift". No gift tax return.

Think there are many. Seems that some people have an attorney who may not be aware of tax consequences and only transfers title and deed for a $1.

That's why it is important to have a competent tax advisor and tax attorney.

[zeros]

See Original Post -Personal Residence

Is this the father's primary residence or a vacation home?

His personal residence as stated in OP.

[Burke]

Client is selling his personal residence which is a cabin to his son. He discounted it by $40K. Would this in any way be a taxable event of any kind? Just wondering. The profit would be about $70K as he has held it for many years.

If it was his primary (main) home, he would qualify for 121 exclusion. It is a taxable event subject to exclusion if he qualifies. If not his main home, it is a capital gain. Doesn't appear that a loss is involved in this case.

[Kram BergGold]

Gift/Sale

You report the sale and claim the 121 exclusion on the $70k profit (assuming he qualifies) and file a gift tax return to report the $40k gift.

[TAXNJ]

Market price

You report the sale and claim the 121 exclusion on the $70k profit (assuming he qualifies) and file a gift tax return to report the $40k gift.

Would this apply when selling a home and asking market price of $800k and buyer offers $750k?

Would think the original post definition of "discount" is important. Is the "discount" because the sale is to family member or is it what the house market offers in negotiating a offering price. Based on the answer, the type of return(s) to be filed.

[ATSMAN]

Would this apply when selling a home and asking market price of $800k and buyer offers $750k?

Would think the original post definition of "discount" is important. Is the "discount" because the sale is to family member or is it what the house market offers in negotiating a offering price. Based on the answer, the type of return(s) to be filed.

I would say no when you are selling to a stranger and that is just the bargain you struck to close the deal.

But the OP mentioned the purchaser was his son and the reduction in price was $40K. That is more like a gift of equity in my opinion.

[Roberts]

I would say no when you are selling to a stranger and that is just the bargain you struck to close the deal.

But the OP mentioned the purchaser was his son and the reduction in price was $40K. That is more like a gift of equity in my opinion.

yep - "sale to related party" has different rules.

[TAXNJ]

Yes

yep - "sale to related party" has different rules.

Yes, apply to the specific situation

much research on this issue. In general, here is one:

http://www.nolo.com/legal-encyclopedia/irs-rules-real-property-sales-relatives.html